From time to time, one that makes payments on a real estate loan or other type of loan may desire to improve his cash flow. For example, a home owner making mortgage payments may undertake to pay for a child's college education, may undergo a career transition or may retire. In such situations, it may be desirable to reduce basic monthly expenditures to accommodate increased expenses or decreased income.
Conventional ways to improve cash flow in connection with the real estate or other loan (hereinafter, “the loan”) include refinancing the loan and/or reducing equity in loan collateral. Refinancing is a solution that depends on interest rates. Refinancing can require the payment of closing costs and the investment of time and effort. Reduction of equity is a solution that may affect borrowing power and financial security.
Conventional interest-only features of loans are designed to reduce the cash flow impact at the inception of a loan payback period, but lack flexibility to manage cash flow as the loan matures.
It would be desirable, therefore, to provide a loan product having an interest-only period that may be extended to the full term of a loan.
It also would be desirable, therefore, to provide a loan product having payment terms that may be switched between interest-only and amortizing.